Thursday, June 1, 2017

Five Billion Dollar Collaboration to Build New Saudi Arabian Maritime Shipbuilding Yard

Shipping Line Invests in Facility Intended to be Largest in Middle East
Shipping News Feature
SAUDI ARABIA – The National Shipping Company of Saudi Arabia (Bahri), state-owned oil group Saudi Aramco, UAE energy firm Lamprell, and South Korean shipbuilder Hyundai Heavy Industries (HHI) have entered into a joint venture with the intention of building and operating a world-class maritime yard within the King Salman International Complex for Maritime Industries and Services, located in Ras Al-Khair Industrial City, on the Arabian Gulf coast, in northeast Saudi Arabia.

This cooperation aims to help the country achieve its ‘Vision 2030’ strategy, with contributions to the enhancement and diversification of the national economy, boosting the Kingdom’s GDP in the coming years, and the development of the local industry and service sector. The JV partners also claim that it will help promote the transportation and logistics sector, creating thousands of new and sustainable job opportunities, and localisation of talent associated with the maritime industries. This strategic partnership aims to capitalise on the rapidly-growing maritime requirements in the region by offering globally competitive, safe, high-quality and on-time solutions. Ali Al-Harbi, Acting CEO, Bahri, said:

“Our Joint Venture with prominent entities such as Saudi Aramco, Lamprell and Hyundai Heavy Industries to establish and operate a cutting-edge maritime yard facility in Saudi Arabia will aid in the enhancement of our service portfolio and optimise efficiency and performance of our business verticals. As demand for maritime services continues to rise, joint ventures like this serve as a significant strategic step towards helping industry players meet the growing need of customers, while also maintaining the highest service standards.”

The new maritime yard will be the largest in the Middle East region in terms of scale and production capacity. The new facility will have the capacity to manufacture 4 offshore rigs, over 40 vessels including 3 VLCCs (Very Large Crude Carriers), and service over 260 maritime products annually. According to the partners major production operations are expected to commence in 2019, with the facility reaching its full production capacity by 2022.

Subject to each companies’ shareholder’s agreement terms, Saudi Aramco is to invest up to a maximum of US$ 350.7 million, Lamprell up to $140 million, Bahri up to $139.3 million, and HHI up to $70 million, over the course of the construction of the Maritime Yard from existing financial resources and future cash flows. They will each hold 50.1%, 20%, 19.9%, and 10%, respectively, of the issued share capital of JVCo, a limited liability company set up by the 4 partners.

The aggregate cost of constructing the Maritime Yard is expected to be approximately US$5.2 billion, of which approximately $3.5 billion will be funded by the Saudi Arabian government to establish, prepare and construct the site and shared infrastructure. The remaining cost of up to $1.7 billion will be funded by JVCo.